{"id":204188,"date":"2017-10-14T09:00:24","date_gmt":"2017-10-14T07:00:24","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=204188"},"modified":"2017-10-14T11:46:29","modified_gmt":"2017-10-14T09:46:29","slug":"more-south-africans-are-applying-for-financial-emigration-heres-how-it-works","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/204188\/more-south-africans-are-applying-for-financial-emigration-heres-how-it-works\/","title":{"rendered":"More South Africans are applying for financial emigration – here’s how it works"},"content":{"rendered":"

The recent tax change has led to a major influx in South Africans applying for financial emigration.<\/p>\n

This is according to Claudia Aires of Financial Emigration<\/a><\/strong> – a South African company that specialises in the process and making sure that all protocols and regulations are followed.<\/p>\n

“Financial emigration has increased significantly due to a variety of reasons however the most applicable is due to the vast non-compliance by many South African expatriates abroad who will be required to pay tax on their worldwide income should they earn more than R1 million per annum and have not ceased tax residency in South Africa,” said Aires.<\/p>\n

“This increase in financial emigration applications has come as a result due to the announcement from National Treasury confirmed in Parliament on the 14th<\/sup> September 2017 that the law change forcing South African expatriates to start paying tax will be proceeded with and take effect as of March 2020.”<\/p>\n

What is financial emigration?<\/strong><\/p>\n

Speaking to BusinessTech, Aires explained that financial emigration is a compliant step from a tax perspective and a formal process with the South African Reserve Bank (SARB) to change your tax status from \u201cresident\u201d to \u201cnon-resident\u201d for exchange control purposes.<\/p>\n

“Contrary to misinformation, the financial emigration process does not require the giving up of citizenship, handing in of passport, selling of property or cancelling of bonds and financial products,” she said.<\/p>\n

Aires explained that there are many reasons why\u00a0South African tax and exchange control residents undertake the financial emigration process.<\/p>\n

“The main reason is this being a legal requirement and part of the \u201cformalities\u201d which a South African must undertake when permanently moving abroad,” she said.<\/p>\n

She indicated that over the past few years, many expatriates have left and not considered it necessary to submit tax returns in South Africa, submitted zero tax returns to SARS, some even indicated that they are unemployed to SARS, whilst earning employment income outside.<\/p>\n

“These expatriates are at risk and the very clear message from National Treasury and SARS is that they must get their affairs in order,” she said.<\/p>\n

“The reason most people financially emigrate is because they have\/will have no connections with South Africa, excluding still using their South African passport or for holiday purposes. This is a SARB legal requirement as well as a SARS requirement to confirm non-residency”.<\/p>\n

Other reasons include the taxing out of foreign allowances;\u00a0as it is a formal requirement to access your retirement annuities; and in certain countries to evidence that you have left South Africa permanently and may assume tax residency and domicile there.<\/p>\n

“Emigration and financial emigration is clearly defined from a compliancy perspective as being vastly different,” said Aires.<\/p>\n

“When a South African emigrates, they are still classified as a South African tax resident living temporarily abroad and are subject to South African tax laws which includes the disclosure and declaration of their worldwide income to SARS as well as any financial regulation applicable to people living in South Africa.”<\/p>\n

“Reversely when a South African financially emigrates they will cease to be a South African tax resident through the South African Reserve Bank and will not be liable to pay any South African tax on their worldwide income but rather be required to disclose and declare to SARS any South African sourced income which will be taxable i.e. rental income.”<\/p>\n

Additionally, becoming non-resident, regardless of the reason why, is a trigger for Capital Gains tax, said Aires.<\/p>\n

“SARS only taxes you on world-wide CGT to this point and, thereafter, you are only liable for CGT on your South African fixed property. This deemed CGT trigger does also not apply to South African fixed property.”<\/p>\n

Open to everyone?<\/strong><\/p>\n

The decision to financially emigrate is based on whether they will return to the Republic in the near future and therefore needs much consideration, said Aires.<\/p>\n

“The approach of National Treasury, under the guidance of Christopher Axelson, emphasised the imperative to protect the interests of South Africa and to ensure a progressive tax system, aligned with international standards,” she said.<\/p>\n

“South Africans who venture internationally must be encouraged to come back to South Africa, as there are dire skills shortages in certain industries.”<\/p>\n

This view is strongly supported by the existing Department of Home Affairs critical skills categories for work visa purposes.<\/p>\n

“Expatriates who want to return home for retirement must also always feel welcome to do so,” she said.<\/p>\n

How to do it<\/strong><\/p>\n

According to Aires,\u00a0the financial emigration process has two key regulatory components:<\/p>\n